Payroll and related expenses are, in most cases, a hotel's largest expense category. The most recent PKF Consulting Trends shows payroll and related expenses to be 30.1% of the costs of operating a hotel. Anything that can be done to minimize this expense represents a significant boost to the profitability of a hotel.

Clearly, hiring the right individuals to be part of the team is key. Orientation and training are important. Good leadership, a personalized balance of positive and negative feed back and incentives, are also crucial. Employees are not mind-readers so the orientation, training and leadership are crucial to you and the employee's success.

Once the process mentioned above is in place, managing the staff schedule becomes one of the most important items in controlling labor expense. Doing this efficiently consists of several steps. These include:

• Establishing and quantifying your service and productivity standards. This step consists of deciding, for example, how many minutes, on average, it should take to clean a room or how many covers a banquet server is expected to handle for various types of meal service. 
• Turning your service and productivity standards into staffing guides. Staffing guides are worksheets which can be used in conjunction with forecasts to establish how many labor hours and/or persons will be necessary to service the expected volume of business over a particular time period in a particular food and beverage (F.& B.) outlet or in the rooms department at the Front Desk, Reservations, Housekeeping, etc. 
• Developing forecasting models for the various parts of your business in which volume varies. Generally, these forecasting models should result in forecasts of volume in units, such as covers or rooms broken down into arrivals, stay-overs and checkouts. Exceptions might include sales volume in beverage outlets and reservations calls. 
• On a weekly basis, upcoming business volume should be forecasted. Variances between the forecasted business volume and budgeted volume should be clearly understood. If they are negative, both marketing and expense control plans are needed to counteract the impact of the revenue shortfalls. Remember, the best forecasts are made of many little estimates rather than one or two big guesses! 
• The forecasts should be applied to the staffing guides to develop staff schedules. Staff schedules should always be costed out and compared to the payroll budgets for the various department. Again, variances need to be studied and understood. In addition to changes in volume, variances can be the result of bad budgeting, poor staffing guides or bad math! 

In addition to forecasting and scheduling, payroll costs can be impacted by many other factors. Previously, I mentioned hiring, orienting & training and leadership. Other items include adequate supervision, inspections and limiting, if not eliminating, overtime. Remember overtime results in premium pay for tired employees who may prefer to be elsewhere!

There are also situations where it may be appropriate to charge guests for extra labor they require. The simplest example of this is where a catering patron requests and signs a clear contract for one set-up and then requests a change after the room is set. Depending on the circumstances, including both the importance, as measured in profit potential of the patron and the hotel's circumstances, a fee may be charged for the resetting expense incurred by the hotel.

As a not too minor point, it should be kept in mind that workers' compensation and unemployment insurance expenses are manageable expenses. Pursuing an expense management program for these two items will, in time, result in reduced payroll burden. The key in these categories, like anything else in payroll expense management, is to be proactive rather than reactive.

It may be tough to judge yourself as it relates to payroll and related expenses. We all employ our staff from a similar pool of potential employees. As managers, we all pride ourselves on our training and leadership skills. All hotels do not have the same resources available for employee benefits. Where we can make a difference is in staff planning so that we use our staff's time and resources as efficiently as possible. We can then improve the quality of our staff and reduce turn/over by returning a portion of the money saved to the individual staff members in higher pay and improved benefits.